Smart Contract Platforms Should Be Seen As A Store Of Value. Here’s How Nervos Is Leading The Way
Much discussion has been made about how dApp and smart contract platforms can (or should) scale.
Jeremy Rubin briefly mused on this point in a TechCrunch article.
He wrote about those who believed ETH would not see real adoption due to “a failure to scale, to adopt more secure contract authoring practices, or to out-compete its competitors.”
Some, like Cuy Sheffield, have started to question where smart contract platforms fit in a world “where their native assets are not held as a monetary store of value.”
He admitted how Ethereum’s growth signaled demand “for a smart contract platform that could power new native digital financial assets and protocols.”
Capitalizing on this potential could lead to Ethereum supporting vast amounts of economic activity - to the tune of billions or even trillions of dollars.
However, Sheffield wrote if Ether is just used as a tool to pay gas fees, value growth might not occur proportionally.
According to him, the PoS shift could make it where Ethereum would be “inexpensive to attack and therefore not secure, limiting its viability for use in many of its potential applications.”
A chunk of Sheffield’s arguments and critiques coalesced into one point.
Since “most Bitcoin proponents” think smart contracts should sit on a second layer, “will developers be willing to wait for this second layer functionality on top of sound money, or will they push ahead and build on available platforms like Ethereum despite the longer term question of native asset value?”
Nervos has already thought long and hard about this.
When asked about why Nervos does not use Ethereum for the first layer, co-founder and CEO Terry Tai explained in an interview
“We believe that if we don’t redesign Layer 1 while taking into considering Layer 2 from the beginning — it would be impossible to get the quality improvement by simply adjusting the parameters of an existing Layer 1 system.”
The layered design of Nervos presents the best of both worlds.
Layer 1 offers security and decentralization, while the second layer is focused on performance. This helps mitigate trade-offs between security, decentralization, and performance.
As Nervos co-founder, architect, and researcher Jan Xie explained in the same interview, “the second layer can go as far as it needs to in order to improve performance.”
This promotes the idea of effective functionality and does not constrain blockchain development.
Another key economic research targets for Nervos is the idea of smart contract platforms being a store of value.
Nervos co-founder Kevin Wang wrote on Medium how “preserving the value of assets issued on top of a platform is an essential part of its cryptoeconomic design.”
He argued token economics which are not designed and optimized as a “store of value” create a ceiling for how valuable platform assets can actually be.
When native tokens are just designed for transaction facilitation, there are not necessarily clear-cut reasons that the native token price will appreciate in line with asset value.
Nervos’ Common Knowledge Base (CKB) is designed to be a first layer protocol for the Nervos Network. The native token for the CKB functions as the ‘fuel’ to pay for computation and as a way to transfer value (money).
The intention for the entire CKB is to be a sustainable, preservation focused smart contract platform.
By fostering research into token economics pertaining to “Store of Value” platforms, Nervos is leading the way on long-term economic stability and how blockchain can be used and compartmentalized to build larger systems.
